Oct 17, 2011

What I have learned about economic development

In a rainy and cloudy afternoon in Guatemala City, while reading this book, thought about writing what I have learned about economic development. This learning comes not necessarily from textbooks, books, or articles, but from observations, and also from the experience of living in developing countries almost all my life. So this is the very subjective list:

"Economic development" does not mean anything, but specific issues such as quality of education, malaria prevention, child mortality, HIV contagion and prevention, work ethic, etc., mean a lot.

Traditional theories like entrepreneurship, innovation, and technological change are important but usually their effectiveness depend on other elements that are more complex. For example, it is not very clear why some societies or communities are more entrepreneurial than others, even when they share a similar institutional framework.

The "right type of leadership" (at the local and national levels) is one of the most important elements, but it is very hard to include in analytical models. Leadership can shape institutions but what makes some leaders to be born and succeed in some countries and not in others seems like a matter of luck.

Practitioners and academics of economic development have very different profiles and skills, it is rare to see a successful practitioner who is also a successful academic, and vice-versa. If you find one who is good at both you have found a gem.

At the individual level, to develop economically is a consequence of intelligence and hard work (assuming a lot of things). One needs to be physically healthy to work effectively, but also one needs to be emotionally and spiritually healthy as well. Very often the heaviest burdens are in the spirit and the heart, not in the material constraints.

A society whose members tell the true to each other prospers. Telling the true is very important to generate trust. Unfortunately very little has been written in the importance of honesty for economic development.

Strong marriages and strong families, where both parents are present have a strong and positive effect on character. Societies where for one reason or another there is a large proportion of separated families have a difficult time finding the path to peace and economic prosperity.

Ambition of power is very damaging at the national level as it is at the micro-organizational level. Many opportunities are lost because people want to do everything on their own without sharing the benefits and the costs; without understanding the benefits of team work.

The poor, like the rich, need enjoyment, that is why some proportion of their very minimal income goes to festivals, etc.

There has been a huge improvement in living standards that are not necessary reflected in income.

Ideology is both positive and negative. Positive because it gives a shortcut to think about social issues, but it is negative because it prevents critical thinking. Some regions of the world, like Latin America, are so ideological fragmented that this even creates social paralysis.

Every country is different, and even if one does not want to accept it, history matters. With every generation that comes the past is less influential, but some societies still need to find themselves [yes, existentially speaking].

To have local examples of success is extremely important. Some kids and adolescents work hard and succeed because they have seen others within their own community succeed as well.

One of the best ways to teach the complexities of economic development is through fiction. This is because in a work of fiction social, economic, historical and other variables mix together so brutally that the combination of all these elements resembles reality closer than does a mathematical, econometric, or experimental models. Although these models have an important role to play to understand specific problems.

Sometimes there is an obsession with economic development when what really matters is happiness. There isn't a straight correlation between income and happiness [at least not after some threshold].